Common use of COLLATERAL SECURITIES Clause in Contracts

COLLATERAL SECURITIES. 3.1 Borrower warrants and represents to Bank that the Securities identified on collateral schedules attached hereto are being delivered to Bank concurrently herewith accompanied by irrevocable stock powers or assignments relating thereto endorsed in blank by Borrower. Borrower, from time to time hereafter, shall endorse any additional Securities to Bank in a form acceptable to Bank in its sole discretion. Such Securities shall be delivered to Bank accompanied with irrevocable stock powers relating thereto or assignments thereof duly executed by Borrower in form acceptable to Bank and duly endorsed in blank by Borrower. 3.2 That portion of the Securities consisting of distributions and payments upon or in connection therewith (whether such distributions or payments are dividends, or in partial or complete liquidation, or the result of reclassification, readjustment or other changes in the capital structure of the Persons issuing the same or otherwise) shall be delivered by Borrower to Bank in the form that the distribution or payment is received by Borrower, and Bank shall hold any such distribution or payment as additional Collateral to secure Borrower's Liabilities and Borrower's Obligations. Any shares of capital stock, securities or evidence of indebtedness so distributed to Borrower shall be delivered to Bank accompanied with irrevocable stock powers relating thereto or assignments thereof duly signed by Borrower in form acceptable to Bank and duly endorsed in blank by Borrower. 3.3 That portion of the Securities consisting of subscriptions, warrants, options and any other rights issued upon or in connection therewith or any portion thereof, shall be delivered by Borrower to Bank, and Bank shall hold such subscriptions, warrants, options and other rights to secure Borrower's Liabilities and Borrower's Obligations; provided, however, that if Bank determines in its sole discretion that the value of any of such subscriptions, warrants, options or other rights shall terminate, expire or be materially reduced by holding the same as Collateral, Bank shall have the right, in its sole discretion, to sell or exercise the same, and if exercised, then the monies disbursed by Bank in connection therewith shall be deemed a loan by Bank to Borrower, and shall constitute part of Borrower's Liabilities, payable by Borrower to Bank on demand. 3.4 Bank may now or at any time or times hereafter, transfer any or all of the Securities into the name of Bank, or into the name of Bank's nominee, without disclosing that such Securities so transferred are pledged or hypothecated, and without any indication on any new certificate or other document issued to evidence such Securities, that such stock is pledged, and the Persons issuing the same, or their transfer agents, shall not be bound to inquire in the event that Bank or said nominee makes any other transfer of the Securities, as to whether Bank or its nominee has the right to make such further transfer, and the Persons issuing the same, or their transfer agents, shall not be liable for transferring the same. 3.5 Unless and until an Event of Default shall have occurred, Borrower shall be entitled to exercise any and all voting or consensual rights and powers and stock purchase or subscription rights relating or pertaining to the Securities or any part thereof for any purpose; provided, however, that Borrower shall give Bank at least 10 days' prior written or telegraphic notice of the manner in which it intends to exercise or the reasons for refraining from the exercise of any such right or power, other than with respect to the election of directors at any meeting of stockholders and incidental matters coming before such meeting; and provided further, that the Borrower agrees that it will not exercise or refrain from exercising any such right or power if, as a result of so doing, the value of the Securities or any part thereof would be adversely affected . 3.6 Borrower warrants and represents to Bank and covenants with Bank as follows: (a) the Securities are, and/or upon issuance thereof will be, validly issued, fully paid and non-assessable and Borrower has, and/or upon issuance thereof will have, good, indefeasible and marketable title thereto, free and clear of all liens, pledges, security interests, encumbrances, claims or demands of any kind, except those of Bank; and (b) the Securities are, and/or upon issuance thereof will be, freely transferable without restriction under federal and state securities laws.

COLLATERAL SECURITIES. 3.1 To secure the performance by Borrower warrants of its obligations hereunder, and represents under the Note and Security Instruments, whether now or hereafter incurred, matured or unmatured, direct or contingent, joint or several, or joint and several, including extensions, modifications, renewals and increases thereof, and substitutions therefore, Borrower has previously granted and assigned to Bank that a first and prior security interest and Lien on certain of its Oil and Gas Properties, and on certain related equipment, oil and gas inventory and proceeds of the Securities identified foregoing. To further secure the performance by Borrower of the aforesaid obligations, Borrower shall contemporaneously with or prior to the execution of this Agreement, grant and assign to the Bank a first and prior security interest and Lien on certain additional Oil and Gas Properties and on certain additional related equipment, oil and gas inventory and proceeds of the foregoing. Obligations arising from agreements arising from Rate Management Transactions between Borrower and the Bank or any Affiliate of the Bank providing for the hedging, forward sale or swap of crude oil and natural gas or interest rate protection shall be secured by the Collateral (as hereinafter defined) on a pari passu basis with the indebtedness and obligations of the Borrower under the Loan Documents. All Oil and Gas Properties and other collateral schedules attached hereto in which Borrower has heretofore granted or hereafter grants to the Bank a first and prior Lien (to the satisfaction of the Bank) in accordance with this Section 6, as such properties and interests are being delivered to Bank concurrently herewith accompanied by irrevocable stock powers or assignments relating thereto endorsed in blank by Borrower. Borrower, from time to time hereafterconstituted, shall endorse any additional Securities to Bank in a form acceptable to Bank in its sole discretion. Such Securities shall be delivered to Bank accompanied with irrevocable stock powers relating thereto or assignments thereof duly executed are hereinafter collectively called the "Collateral." The granting and assigning of such security interests and Liens by Borrower in form acceptable to Bank and duly endorsed in blank by Borrower. 3.2 That portion of the Securities consisting of distributions and payments upon or in connection therewith (whether such distributions or payments are dividends, or in partial or complete liquidation, or the result of reclassification, readjustment or other changes in the capital structure of the Persons issuing the same or otherwise) shall be delivered by Borrower to Bank in the form that the distribution or payment is received by Borrower, and Bank shall hold any such distribution or payment as additional Collateral to secure Borrower's Liabilities and Borrower's Obligations. Any shares of capital stock, securities or evidence of indebtedness so distributed to Borrower shall be delivered pursuant to Bank accompanied with irrevocable stock powers relating thereto or assignments thereof duly signed by Borrower Security Instruments in form acceptable and substance reasonably satisfactory to Bank and duly endorsed in blank by Borrower. 3.3 That portion the Bank. Concurrently with the delivery of each of the Securities consisting of subscriptions, warrants, options and any other rights issued upon or in connection therewith or any portion thereof, shall be delivered by Borrower to Bank, and Bank shall hold such subscriptions, warrants, options and other rights to secure Borrower's Liabilities and Borrower's Obligations; provided, however, that if Bank determines in its sole discretion that the value of any of such subscriptions, warrants, options or other rights shall terminate, expire or be materially reduced by holding the same as Collateral, Bank shall have the right, in its sole discretion, to sell or exercise the same, and if exercised, then the monies disbursed by Bank in connection therewith shall be deemed a loan by Bank to Borrower, and shall constitute part of Borrower's Liabilities, payable by Borrower to Bank on demand. 3.4 Bank may now or at any time or times hereafter, transfer any or all of the Securities into the name of Bank, or into the name of Bank's nominee, without disclosing that such Securities so transferred are pledged or hypothecated, and without any indication on any new certificate or other document issued to evidence such Securities, that such stock is pledged, and the Persons issuing the same, or their transfer agents, shall not be bound to inquire in the event that Bank or said nominee makes any other transfer of the Securities, as to whether Bank or its nominee has the right to make such further transfer, and the Persons issuing the same, or their transfer agents, shall not be liable for transferring the same. 3.5 Unless and until an Event of Default shall have occurredSecurity Instruments, Borrower shall be entitled to exercise any and all voting or consensual rights and powers and stock purchase or subscription rights relating or pertaining furnish to the Securities or any part thereof for any purpose; provided, however, that Borrower shall give Bank at least 10 days' prior written or telegraphic notice of the manner in which it intends mortgage and title opinions and other title information satisfactory to exercise or the reasons for refraining from the exercise of any such right or power, other than Bank with respect to the election title and Lien status of directors at any meeting Borrower's interests in the Oil and Gas Properties covered by the Security Instruments as Bank shall have designated. Borrower will cause to be executed and delivered to the Bank, in the future, additional Security Instruments if the Bank reasonably deems such are necessary to insure perfection or maintenance of stockholders Bank's security interests and incidental matters coming before such meeting; Liens in the Oil and provided further, that the Borrower agrees that it will not exercise or refrain from exercising any such right or power if, as a result of so doing, the value of the Securities Gas Properties or any part thereof would be adversely affected thereof. 3.6 Borrower warrants and represents to Bank and covenants with Bank as follows: (a) the Securities are, and/or upon issuance thereof will be, validly issued, fully paid and non-assessable and Borrower has, and/or upon issuance thereof will have, good, indefeasible and marketable title thereto, free and clear of all liens, pledges, security interests, encumbrances, claims or demands of any kind, except those of Bank; and (b) the Securities are, and/or upon issuance thereof will be, freely transferable without restriction under federal and state securities laws.